Greenback blues

The value of the U.S. dollar has reached historic lows over the past several months, and one would expect international investors to be buzzing about that.

The value of the U.S. dollar has reached historic lows over the past several months, and one would expect international investors to be buzzing about that.

One also could predict that Canadians would make a fuss over the fact that their dollar, the "loonie," achieved parity in September and subsequently surpassed the value of the U.S. dollar for the first time in 30 years.

And when Venezuelan President Hugo Chavez and Iranian President Mahmoud Ahmadinejad, two rabid America-haters, recommended to the Organization of Petroleum Exporting Countries that it untie the value of oil from the dollar, which they dismissed as a "worthless piece of paper," that was not a huge surprise.

The real canary in the coal mine is when pop-culture icons, who aren't noted for their attention to currency markets, start getting into the act.

A few weeks ago, supermodel Gisele Bundchen captured international attention when she opted to be paid for a job in euros instead of greenbacks.

In a genre that's known for being "all about the Benjamins" ($100 bills), rapper Jay-Z flashes a fistful of euros in a new video.

A devalued dollar does come with some benefits. U.S. exporters to European countries are doing a brisk business because American goods have become relatively less expensive. That could begin to chip away at the giant U.S. trade deficit. Some exporters report being able to expand their businesses and hire more workers this year. Meanwhile, Christmas shoppers haven't seen a corresponding price increase among imports because most of them come from China, where the yuan's value is still very low.

Also, Americans who own foreign stocks find them suddenly worth more.

On the other side of the ledger, some international investors are looking more favorably upon foreign currencies and markets. Some financial experts have expressed concern that foreign investors will pull out of the U.S. stock market en masse, creating a major downturn.

The worst consequence is psychological. The supremacy of the dollar is linked in people's minds to U.S. power and influence in the world.

For a half-century, no matter what America did or who ran the government, the dollar was generally solid. In fact, central banks in countries all over the globe built up large reserves of dollars to protect their assets; 64 percent of bank reserves are in dollars, mostly Treasury bonds. Foreign banks are now rethinking that policy.

Deficits do matter, regardless of what a certain vice president said back in 2002. The U.S. has hobbled itself for years to come, by waging two expensive wars and increasing entitlement programs while failing to reduce other spending or raise taxes to balance the books. Meanwhile, U.S. financial institutions have been staggered by the mortgage-foreclosure crisis.

But there is nothing wrong with the U.S. dollar that can't be cured, and quickly, with common sense and fiscal responsibility. Rather than promising expensive new programs, the presidential contenders should be talking about how they'll balance the nation's books and restore the world's confidence in the dollar.

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